DoD's $232M contract for search and navigation systems awarded to Lockheed Martin shows strong competition

Contract Overview

Contract Amount: $232,481,820 ($232.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2016-12-23

End Date: 2025-05-28

Contract Duration: 3,078 days

Daily Burn Rate: $75.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: PRE DESIGN AOEW AMP (BASE)

Place of Performance

Location: LIVERPOOL, ONONDAGA County, NEW YORK, 13088

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $232.5 million to LOCKHEED MARTIN CORPORATION for work described as: PRE DESIGN AOEW AMP (BASE) Key points: 1. The contract value of $232.5 million represents a significant investment in advanced defense systems. 2. Awarded through full and open competition, this contract suggests a healthy market for these specialized components. 3. The use of a Cost Plus Incentive Fee (CPIF) pricing structure indicates a focus on performance and cost control. 4. The contract duration of over 8 years points to a long-term need for these critical systems. 5. The geographic location of the contractor in New York may have implications for regional economic impact. 6. The absence of small business set-asides suggests the primary contractors are large, established entities.

Value Assessment

Rating: good

The contract's value of $232.5 million for search, detection, navigation, guidance, aeronautical, and nautical systems appears reasonable given the specialized nature of the technology and the duration of the contract (over 8 years). Benchmarking against similar complex defense systems contracts is challenging without more specific technical details, but the CPIF pricing structure suggests an effort to align contractor incentives with cost efficiency. The number of bidders (3) indicates a competitive environment, which typically leads to better value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. Three bids were received, suggesting a competitive landscape for these advanced defense systems. The presence of multiple bidders generally fosters price discovery and encourages contractors to offer competitive terms.

Taxpayer Impact: Taxpayers benefit from full and open competition as it typically drives down costs and ensures the government receives the best possible value for its investment in critical defense capabilities.

Public Impact

The primary beneficiaries are the Department of Defense and its operational units, which will receive advanced search, detection, and navigation systems. These systems are crucial for enhancing situational awareness, mission effectiveness, and safety for naval and aeronautical operations. The contract supports the manufacturing and integration of high-tech components, potentially impacting the aerospace and defense industry workforce. The geographic impact is primarily centered around the contractor's facilities in New York, contributing to local employment and economic activity.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in CPIF contracts if not closely monitored.
Long contract duration could lead to technology obsolescence if not managed proactively.
Reliance on a single large contractor (Lockheed Martin) may limit future flexibility.

Positive Signals

Awarded through full and open competition, indicating a robust market.
CPIF structure incentivizes cost control and performance.
Contract duration suggests a stable, long-term requirement for critical systems.

Sector Analysis

This contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector (NAICS 334511). This is a highly specialized segment of the aerospace and defense industry, characterized by high R&D investment, stringent quality requirements, and long product development cycles. The market is dominated by a few large, established defense contractors. Spending in this sector is driven by national security needs and technological advancements.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, and there is no explicit mention of small business subcontracting goals. This suggests that the primary contract is likely being fulfilled by large defense contractors, and any involvement of small businesses would be through subcontracting opportunities managed by the prime contractor. Further analysis would be needed to determine the extent of small business participation.

Oversight & Accountability

Oversight for this definitive contract is likely managed by the Department of the Navy's contracting and program management offices. Accountability measures would be embedded within the Cost Plus Incentive Fee (CPIF) structure, linking contractor performance and cost control to fee adjustments. Transparency is generally maintained through contract award databases, though specific performance metrics and detailed cost breakdowns may be considered sensitive defense information.

Related Government Programs

Naval Aviation Systems
Defense Electronics Manufacturing
Aerospace Navigation Equipment
Search and Detection Systems
Guidance Systems Manufacturing

Risk Flags

Long contract duration may increase risk of technology obsolescence.
CPIF contracts require diligent oversight to manage costs effectively.
Lack of explicit small business set-aside information.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $232.5 million to LOCKHEED MARTIN CORPORATION. PRE DESIGN AOEW AMP (BASE)

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $232.5 million.

What is the period of performance?

Start: 2016-12-23. End: 2025-05-28.

What is Lockheed Martin's track record with similar DoD contracts, particularly those involving search, detection, and navigation systems?

Lockheed Martin Corporation is a major defense contractor with extensive experience in developing and producing advanced systems for the U.S. military, including radar, sonar, navigation, and guidance technologies. They have a long history of delivering complex solutions across various platforms, including naval vessels and aircraft. While specific performance data for individual contracts is often proprietary, their consistent selection for large-scale defense programs suggests a generally positive track record in meeting technical requirements and delivery schedules. However, like many large defense contractors, they have occasionally faced scrutiny over cost performance and contract modifications on complex, long-term projects. A detailed review of their past performance on contracts with similar scope and complexity would be necessary for a comprehensive assessment.

How does the $232.5 million contract value compare to historical spending on similar navigation and detection systems by the Department of the Navy?

The $232.5 million contract value for search, detection, navigation, guidance, aeronautical, and nautical systems represents a significant, but not unprecedented, investment for the Department of the Navy. Historically, the Navy procures a wide array of sophisticated electronic systems for its fleet, with individual contract values often ranging from tens to hundreds of millions of dollars, especially for systems integrated into major platforms like ships and aircraft. The duration of this contract (over 8 years) means the annual spending is more moderate. To provide a precise comparison, one would need to analyze historical spending trends for specific system types (e.g., radar, sonar, inertial navigation) within the Navy's budget over the past decade, considering inflation and technological evolution. However, the award through full and open competition suggests the price was deemed competitive within the current market for such advanced capabilities.

What are the primary risks associated with a Cost Plus Incentive Fee (CPIF) contract of this magnitude and duration?

The primary risks associated with a Cost Plus Incentive Fee (CPIF) contract of this magnitude ($232.5M) and duration (over 8 years) revolve around cost control and performance management. While CPIF aims to incentivize efficiency by sharing cost savings or overruns between the government and contractor, there's a risk that the target cost could be set too high, diminishing the incentive for true cost reduction. If the incentive targets are not well-defined or achievable, the contractor may not be adequately motivated to perform beyond minimum requirements. Furthermore, the long duration increases the potential for scope creep, unforeseen technical challenges, or changes in operational requirements, which can lead to contract modifications and potential cost increases. Robust government oversight is crucial to monitor costs, track performance against milestones, and ensure the incentive structure effectively aligns contractor efforts with program objectives.

How effective is the 'full and open competition' strategy likely to be in ensuring value for money on this specialized defense system contract?

The 'full and open competition' strategy is generally considered the most effective method for ensuring value for money, especially for specialized defense systems where multiple capable suppliers exist. By allowing all responsible sources to bid, it maximizes the pool of potential offerors, fostering a competitive environment that drives down prices and encourages innovation. The fact that three bids were received suggests that the market is sufficiently robust to support this approach. However, the effectiveness also depends on the clarity of the solicitation requirements, the evaluation criteria used, and the government's ability to accurately assess the technical and cost proposals. For highly specialized systems, ensuring that bidders fully understand the complex requirements is critical. If the competition is well-executed, it should lead to a fair price and a system that meets the demanding performance specifications required by the Department of Defense.

What are the potential implications of awarding this contract to Lockheed Martin, a major defense prime, on the broader defense industrial base and small business participation?

Awarding a significant contract like this to a major defense prime such as Lockheed Martin has several implications. It reinforces the position of large, established companies within the defense industrial base, providing them with substantial revenue and opportunities for further technological development. For small businesses, the implications are mixed. While this specific contract may not be directly set aside for them, large primes often engage small businesses as subcontractors for specialized components, services, or manufacturing. This can provide valuable opportunities and revenue streams for innovative small firms. However, it also means that small businesses are reliant on the prime contractor's subcontracting plans and procurement decisions. Over-reliance on a few large primes can also create barriers to entry for smaller, emerging companies seeking to break into the prime contracting space.

Are there any specific performance metrics or Key Performance Parameters (KPPs) associated with this contract that indicate its expected effectiveness?

The provided data does not specify the Key Performance Parameters (KPPs) or detailed performance metrics for this contract. However, given the nature of search, detection, navigation, guidance, aeronautical, and nautical systems, typical KPPs would likely include metrics related to accuracy (e.g., target detection range, navigational precision), reliability (e.g., Mean Time Between Failures - MTBF), operational availability, system responsiveness, power consumption, and environmental resilience (e.g., operating temperature range, shock/vibration resistance). The Cost Plus Incentive Fee (CPIF) structure suggests that performance against specific, measurable targets will be linked to the contractor's fee. The effectiveness of the delivered systems will ultimately be determined by their ability to meet these undisclosed KPPs in real-world operational scenarios, contributing to mission success and safety for the end-users within the Department of Defense.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: ELECTRICAL/ELECTRONIC EQPT COMPNTS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002414R5353

Offers Received: 3

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 497 ELECTRONICS PKWY BLDG 5, LIVERPOOL, NY, 13088

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $363,678,488

Exercised Options: $242,416,058

Current Obligation: $232,481,820

Actual Outlays: $2,753,036

Subaward Activity

Number of Subawards: 387

Total Subaward Amount: $809,820,195

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline